Brit chip bods ARM quietly piling up cash. Softbank will be happy

Processor design nets £100m in last quarter for Cambridge-based biz

Cambridge-based processor design business ARM has posted substantial revenue and profit increases for the months in the runup to the Brexit vote.

The company being bought by Japanese megacorp Softbank for £24.3bn, though Softbank has promised that this will be a Brexit in ownership only.

ARM will retain its "senior management team, brand, partnership-based business model and culture" while Softbank "at least doubles the employee headcount in the UK over the next five years."

While that acquisition is yet to conclude, it looks like a wonderful bit of business for Softbank, and not just because of the diminished pound.

In Q2 2016 ARM reported a 17 per cent increase in year-on-year revenue, up from £228.5m last year to £267.6m, and a five per cent increase in pre-tax profit to £130.1m.

Operating expenses rose 32 per cent year-on-year to to £130.7m, but remained reasonably stable compared to Q1 2016 when they accounted for £132.9m. According to ARM this was primarily due to an increase in headcount.

Research and development accounted for £67.9m, representing a fifth of ARM's revenues.

Processor licensing, which provides the overwhelming bulk of ARM's revenue, increased by 24 per cent to £102.2m, with 25 more licenses being signed in Q2. 13 of these were for its Cortex-M class processors, "for use in the key components of smart connected devices: microcontrollers, smart sensors and low-power wireless communication chips." Cortex-M class processors account for 388 of the 1,379 licenses ARM holds in total as of Q2 2016.

Revenues from physical IP, which is licensed to chip foundries and semiconductor companies, contracted by 31 per cent to £9.4m, according to ARM due to "strong licensing throughout 2015, the timing of engineering milestones, and the trend to more single-use POP IP licenses."

ARM seems to be readying itself for greater developments in the world of embedded device design as the smartphone market continues to stall.

Simon Segars, ARM's CEO, said his firm “is continuing to invest in products that will support our partners’ roadmaps as they develop next-generation technologies such as 5G networks, autonomous vehicles and the Internet of Things.”

“Our recent acquisition of Apical enhances our expertise in visual computing, a rapidly-advancing field which is enabling smart buildings, augmented reality, self-driving cars and advanced robotics.” Segard added. “As new technologies are created and new markets emerge, ARM will continue to evolve its products and business models to capture the opportunities ahead.” ®